Aristotle and Aquinas, Bank Regulators

Okay, so after years of inaction, the SEC has finally taken the offensive. True, they went after a small deal, a mere billion in “designed to fail” CDO’s on which Goldman Sachs made a paltry $15 million, an amount which, in the overall scheme of these frauds, doesn’t even amount to a rounding error, as Gretchen Morgenson pointed out. Still, it’s enough to damage the reputation of Goldman Sachs, perhaps fatally, and perhaps enough to re-establish the SEC as a regulatory force. However, there is a deep problem: what should the regulators be regulating?

We live in an age of regulation. But surprisingly, there are very few principles of regulation. As Karl Polyanyi said, “Laissez-faire was planed; planning was not.” Planning always seems to be something that always arises ad hoc, to address a particular situation, but hangs on and acquires a life (and a bureaucracy) of its own, even after the situation changes. The result is that we are simultaneously over-regulated and under-regulated; we have thousands of pages of regulations that deal with situations that don’t require any, and no regulation in areas that need to be closely watched. The regs raise formidable barriers to competition, as the small businessman often finds that the cost and trouble of dealing with them is an insurmountable barrier to entering a given business. This leaves only the large players, for whom such regulation is a mere nuisance, a cost of doing business that brings a benefit of reduced competition. And since there are fewer competitors, they tend to be more politically powerful, and proceed to capture the very regulatory bodies that are intended to curb them. The government becomes, in effect, the protector of the oligarchs rather than their regulator.

The current case is a case in point. We often hear how “complex” these schemes are, but in fact this fraud was simplicity itself. Goldman Sachs allowed a certain hedge fund trader, John Paulson, to put together a group of mortgages that would be packaged into a CDO, a “collateralized debt obligation” which was sold to Goldman’s investors. However, Paulson was also known to be shorting the mortgage market. Paulson deliberately assembled a package of loans whose underlying risk was much higher than the credit ratings indicated. Goldman Sachs then marketed Paulson’s poison-pill CDO to other banks, pension funds, and individuals. But Paulson, knowing the true risk of the security, purchased CDSs on the package. A CDS (“credit default swap”) is an insurance policy on a security that pays off when the underlying security fails. But the term “underlying security” is a fiction; Mr. Paulson did not own the CDO he was insuring. There was no “underlying security.” It is like buying a fire insurance policy on your neighbor’s house, and hoping it burns down.

Goldman Sachs didn’t bother to tell its investors that the CDO was put together by someone who was betting that it would fail. Instead, they said in their prospectus that it was put together by somebody else. Why they bothered with this lie is a bit of a mystery, since nobody ever actually reads a prospectus.

The man at Goldman responsible for selling these securities, Fabrice Tourre, knew they were about to fail. In an e-mail to a colleague, he stated,

More and more leverage in the system. The whole building is about to collapse anytime now… Only potential survivor, the fabulous Fab[rice Tourre]… standing in the middle of all these complex, highly leveraged exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!”

You can bet that wasn’t in the prospectus. But if there is one thing that both Democrats and Republicans agreed about in the 90′s, it was that these “monstrosities” didn’t need to be regulated. The market for them was composed of sophisticated investors who were more than capable of evaluating the risks and taking the losses, should their be any, and the public need not trouble themselves about such things. Senator Phil Gramm led the Republican efforts to deregulate this market, joined by such Democratic stalwarts as Robert Rubin and Larry Summers, and President Clinton signed the bill with little fanfare in 1999. But as things turned out, when the highly leveraged bets brought down the whole economy, the risks were socialized, and the profits were privatized. The US Treasury became the hedge funds Ultimate Hedge.

So what should the regulators be doing? One could pass this off as mere fraud, which is already illegal, but that would miss the point. The practice of touting such complex instruments to customers while shorting them in your own portfolio is common enough. Indeed, the appetite for these CDO’s was immense, but the number of solvent borrowers in the mortgage market is limited. To meet the demand, banks and mortgage companies pushed their loan officers to ignore underwriting standards and to make as many loans as possible, prudent or not. For example, in one CDO examined by Roger Lowenstein, on 43 percent of the underlying loans, the lender hadn’t bothered to verify the borrower’s employment and income. These were part of the famous “Liar Loans” and NINJA loans (“No-income, no job or assets.”)

So what can be done, apart from sending a bank regulator on every loan interview? For one thing, we could listen to Aristotle on this subject. Not too long ago, a Prominent Economist told me that Aristotle had nothing to teach us about modern finance. I beg to differ; Aristotle, and the Scholastics who adopted his approach to economics, were surprisingly sophisticated on these topics, while so many Prominent Economists are surprisingly naïve. Indeed, Aristotle left us a principle of commerce that serves very well as a principle of regulation. This principle is the distinction he makes between natural and unnatural exchange. Modern commentators, who make no distinctions, have viewed this as a mere primitive hostility to business; actually, it was a shrewd appreciation of commerce. For Aristotle, natural exchange was that which was necessary for the provisioning of the family (the true meaning of economics.) Unnatural exchange that which had only money as it object.

The former is “natural” because it limits itself; that later unnatural because is has no natural limits. For example, a man wishing to buy bread for his family will buy only as much as he needs; this is a natural exchange. But a man wishing only to make money in the bread biz may wish to buy up all the bread and corner the market so as to raise prices and make a fortune on others’ necessities; this is an unnatural exchange. When applied to finance, a transaction is natural when it is when it is firmly and directly tied to the production of some actual product; it is unnatural the more abstract and derivative it becomes, and when its only object is to make money rather than profit from production. Thus, we may say that banks directly financing home purchases or construction are natural transactions, and less natural when they become “securitized,” bundled together and sold in packages to remote investors who will have no contact with the actual homes, banks, or borrowers. The situation becomes even more abstract when you speak of securitizing the securities (“CDO-Squared” or even “CDO-Cubed”) or with CDSs, which become pure speculative bets on the market. The more abstract the instrument, the more closely it should be scrutinized.

As things now stand, we have reversed Aristotle’s order: the natural exchanges are highly regulated, while the unnatural ones are often unregulated. In more normal times, when you went to George Bailey to get a mortgage, he squinted at you real hard to see if you are the kind of person who will pay him back for 30 years. George needs little oversight to encourage him to be prudent, since he has the bank’s capital and the depositors’ money at risk. But if George merely intends to securitize the loan, then he merely glances at you to see if you are the kind of person who will pay for two weeks, because after that you are somebody else’s problem. In the meantime, dear old George has made a bundle on excessive loan fees and commissions on the sale of the security. George has every reason to write every loan he can, even liar loans, because they all bring him a profit, and he hopes he can park the loss with someone else. And even if he can’t, he knows that the Fed is there to provide him with any amount of “liquidity” he may require, and if he gets big enough, he can always call on the United States Treasury, since the consequences of his actions will be catastrophic; he is in a position to blackmail an entire nation, or even the entire world.

Applications of this principle will be fairly obvious, in most cases. Take the example of CDSs. As an insurance policy, it is surely a natural exchange, a real service that guards against real loss. But when people insure things they do not own, the exchange becomes unnatural and the CDS becomes a mere speculative bet on a given market, one that produces no social gains. The rule should be a rather simple one: “No harm, no foul.” If there is no loss suffered, there should be no claim paid. If you do not own the failing security, you cannot claim a loss on it. Consider that at its height, the notional value of the CDS market was $600 trillion, or eleven times the GDP of the entire planet. Likewise, MBSs and CDOs, should be subject to heavy scrutiny, and even more so when they are squared or cubed; the amount of the regulation is given by their distance from the “real” transaction to which they refer.

In the bad old days, before we became enlightened, we had to think things through for ourselves. Now we have farmed the job out to experts who claim to understand the complexities that their own “expertise” created. In those times, philosophers did not hesitate to address themselves to mundane subjects of commerce and kingship, and every theologian worth his stipend routinely addressed matters of state and business. It was considered part of their job. But the “experts” have, once again, botched things up; Fab Tourre failed to understand the monstrosities he created, although he did understand how to profit from them, at our expense; he was an expert in all the wrong things. It may be time to call again on the philosophers; the Prominent Economist may have to subject his thought to the theologian, the banker to the philosopher.

The SEC has finally moved, albeit somewhat after the fact. It may be merely a political ploy, a way for the Administration to put some pressure on the Republicans, who have vowed to stop any banking regulation, no matter what. The Administration will dribble out cases like this from now to election day, and will call some votes in the Senate that will be stopped short of action by the Republicans. They will force the Republicans to stop them from doing what they don’t want to do, make real reforms. They can embarrass the Republicans, even in front of their Tea-Party supporters, while not actually having to take any action. Politically, it’s a good deal, and may give them some leverage going into November.

But just in case anybody does want real reform, we might turn to those who have given the market real thought, thought that has survived 2,500 years of scrutiny. Bank regulation is a MEGO subject (“My Eyes Glaze Over”), and if you, loyal reader, have gotten this far in this essay, it is likely that you are a nerd or have mild Asberger’s Syndrome; you may be the kind of person who would actually read a prospectus. But despite the lack of interest and understanding, we must have some public interest in these things, apart from the “experts” like Fabrice Tourre and John Paulson. We cannot do without a proper finance system. Between the planting and the harvest, there is a gap, and likewise between opening a production line and the sale of a product. This gap must be financed. But finance itself must be made to serve this gap, to bridge it for the common good. When it has no other point but to enrich the few at the expense of the many, then the real economy has no future, and if it has no future then neither do we, nor do our children. We could do worse than turning the system over to people who have read a little Aristotle and Aquinas.

“When applied to finance, a transaction is natural when it is firmly and directly tied to the production of some actual product; it is unnatural the more abstract and derivative it becomes, and when its only object is to make money rather than profit from production.”

Here is a supporting document from your own back yard that you may not have seen. It sheds new light on the formation of the housing bubble and highlights the dangers of allowing the vertical integration of house building production and finance companies:-

We, I think, instinctively know the difference between the “natural” and “unnatural”. Some folks, like me, have faith in the “Invisible Hand” to correct both for the better in the free marketplace. Or, perhaps it is best described by Schumpeter’s “Creative Destruction”.

It is amazing to me that we have devolved into a system where the SEC and myriad other entities seem to exist to aid and abet the oligarchs. The free market tried to correct the excesses and make the system better. Just as the free market tried to tell us we didn’t need Chrysler in the early 80s. Instead of allowing the system to work, we bailed-out the worst of the perpetrators. & it is phenomenal how we have been convinced that simple arithmetic and fraud can be considered too complicated for the populace to understand. & that only the Paulsons and Geitners of the world are capable in this area.

In lieu of solutions (which I do not have), with hope, I will send a link to this article to others.

Thanks for keeping Aristotle and Aquinas in the debate! Only that each member of the House & Senate be required to sit at your feet! Keep up the good work!

How many times does a culture need to hear the old adage that “Business is Business” to start believing that business possesses an abridged code of morality and that, indeed, in order to prosper it must be relieved from the moral constructs governing the rest of human intercourse. It takes on a kind of magical thinking then…hidden hands, voila and all.

Bruce, thanks for the link. In my own business, corruption has been legalized. We take kickbacks from mortgage companies, title companies, warranty companies, insurance, etc. I think only inspectors and appraisers are forbidden to give us bribes. Of course, there is no corruption in America, unlike backward places like Afghanistan and Iraq. Why? Because corruption implies something illegal, whereas with our enlightened laws, we legalize all sorts of behaviors.

Steve, theories like the invisible hand are contingent theories; that is, there operation depends on a set of conditions, and only under those conditions does the theory operate. In the case of the IH, some of the conditions are perfect competition with production spread over a vast number of firms, perfect transparency and information symmetry, etc. Of course, none of these conditions hold in the real world. Thus, a theory may be useful as a paradigm, but useless as a guide to policy and action in the real world. As for Creative Destruction, I wonder how many people are actually aware of Schumeter’s thesis. Capitalism does indeed creatively destroy whatever it creates, until it finally destroys itself. It is not a hopeful theory, but a pessimistic one.

Also the SEC was deliberately taken out of the business of regulating derivatives, Warren Buffets’ “financial weapons of mass destruction.” It is hard to blame anybody but the market itself for the failure of this market.

I guess if you have spare money and invest them in savings with a bank which then buys a synthetic CDO from an investment bank to cover the interest it has agreed to pay you then both you and your bank would be wanting to go as “long” as risk would permit for a particular rated synthetic CDO. Your bank would communicate this constraint, or parameter, to the investment bank. For the investment bank to allow a third party who wanted to bet “short” using CDS’s to choose some of the mortgages that made up that synthetic CDO and not tell your bank it was doing this is in these circumstances a breach of its duty of care. For the investment bank to claim it’s a caveat emptor situation is much like you buying a car and being expected to check out the specification of every component. This is why the duty of care exists within the law. This is a major reason why we have laws so that we can make good use of trust and live our lives as pleasurably as we can without spending all our time being suspicious of each other and checking out every known fact before we commit to exchange. The people of the United States need to “clean house” to get rid of a system that permits such pervasive breaches of trust.

_Also the SEC was deliberately taken out of the business of regulating derivatives, Warren Buffets’ “financial weapons of mass destruction.” It is hard to blame anybody but the market itself for the failure of this market._

Failure of the market? Sounds to me like the failure of regulatory politics.

If corruption has been legalized in the home building/financing/selling industry and the Goldman Sachs case is revealing the tip of an iceberg of gigantic corruption proportions in the banking industry then we would appear to have developed “organized crime syndicates”. This is even more frightening when the New York Times reports that in 1995, the assets of the six largest banks totaled 17 percent of the nation’s gross domestic product but now in 2010 they amount to 63 percent of G.D.P:-

If “organized crime syndicates” are also bankrolling the election of politicians then America’s 1776 Revolution has been betrayed to become no better than the corrupt oligarchic British rule it replaced!

“Capitalism does indeed creatively destroy whatever it creates, until it finally destroys itself. It is not a hopeful theory, but a pessimistic one.” John Medaille

John, I have never considered whether, or not, Schumpeter is hopeful. I need to spend more time on the subject to respond intelligently. However, I read an analogy a while back that made sense to me: Capitalism is to prosperity as Bernoulli’s Theorem is to flight. When a plane crashes we don’t find fault with Bernoulli’s Theorem but look for causes elsewhere. Capitalism, then, creates what is beneficial and destroys what is obsolescent, fraudulent, of poor quality and unnatural.

The government is conducting many investigations of wrongdoing after the market tried to punish the perpetrators. In just the last few days, it has come to light that folks freshly out of government are advising most of those being investigated. One example: Goldman is being represented by Obama’s former WH Counsel!

Human nature being what it is, can’t we see that government is not the answer? I would submit that the derivatives market is a lot more transparent and “honest” because of the market’s creative destruction than because of any government action. Government came to the rescue of those the market was trying to punish. Just as silly was government’s response to Enron. Instead of using the debacle as a teaching tool, we got SarBox; even while adequate statutes were on the books in Texas which punished the perpetrators of the fraud.

Steve. Please re-read what you have just written. It’s completely contradictory. First you say “government is not the answer” then you say that “adequate statutes were on the books in Texas” to punish business fraud. Were these statutes not made by government?

Steve, your attempt to equate capitalism and Bernoulli’s Theorem is comparing apples and oranges, even if it is a false comparison often made when discussing the realm of economics. The latter is a theory to describe the PHYSICAL world, which acts according to natural laws and predictable patterns, thus making it a very adequate tool of prediction given certain circumstances. The former (capitalism) is an ideological construct made to try and describe human interactions, and as such, often finds itself quite inadequate as a tool of prediction.

Secondly, capitalism has indeed left a long trail of destruction of positive institutions in its wake — the extended family, community and the value of place foremost on that list. While I do not deny that it has certainly brought tremendous material comfort to us as individuals, to portray it as purely beneficial is stretching the truth past its breaking point.

As to whether the benefits outweigh the losses… that is still something to be determined, in my humble opinion.

Thanks, Bruce; you’re right. To be more specific: I think a tort system, as per my example, is better than a regulatory system. Both rely on government. The former works well, the latter deludes and deceives, & encumbers as we are seeing…It is rife with opportunities for lobbyists and manipulation.

Thanks, Chris; to lay the destruction of the extended family, community, and the value of place at the feet of capitalism is, in my humble view, totally false. Please don’t think that I see the corporatist as a capitalist. I place him more in the socialist camp with a fascist vs. a communist flavor. He is in league with big government &, at best, could be considered a perversion of capitalism (Goldman & GM).

Christopher Harrison wrote: Secondly, capitalism has indeed left a long trail of destruction of positive institutions in its wake — the extended family, community and the value of place foremost on that list. While I do not deny that it has certainly brought tremendous material comfort to us as individuals, to portray it as purely beneficial is stretching the truth past its breaking point.

I would submit that this destruction has been caused by industrialism, not capitalism. It has been just as big a problem for systems that organize their industrial enterprises through socialism as for those that use free market capital to do it. In fact, socialist industrial systems have probably caused even more of this destruction.

Big projects like railroads, skyscrapers, road systems, fighter jets, and computer chip factories, all require huge amounts of capital. Somebody has to organize that capital, and somebody has to be in charge of it, which means you have concentrations of power and money. Whether it’s a single payer, monopolistic system like you have under socialism or a somewhat more diverse system like you get under free market capitalism, it’s all a long ways from a self-contained, subsistence economy. It’s all destructive of family, community and place.

@John, I do not think it is industrialism per se that causes the problems. Mondragon has 100,000 worker-owners making highly sophisticated products and doing $25B/annum. It does not exhibit these pathologies. The same is true in Emilia Romagna, or in many employee owned corporations.

@Steve, while I appreciate the distinction between the capitalist and the coporatist, there is no principle in capitalism which prevents the one from becoming the other, particularly if you exclude any regulations. In fact, the whole thing begins with “corporatism” (originally called Mercantilism), the system against which Adam Smith turned his venom, but to which he could find no real answer.

As to the tort system, some advance a very peculiar argument. They say we don’t need regulation because we have torts, and then say we need to reform the system to limit torts. Regulation, it would seem, is bad, unless we are regulating torts. Go figure.

John, I appreciate your informing me that there is such a thing as Mondragon. I have long wondered about the repeated failure of worker-owned and controlled industries, and even why professional baseball once started as a player-owned organization but quickly separated into owners and players.

After reading about it, I am not so sure that Mondragon does anything that requires the large amounts of capital on the scale that are required to build railroads, fighter jets, etc. Nor is there universal agreement that it is free of the pathologies that have been listed here. It’s a shame people have to sign up for a type of serfdom to be a part of it.

But it does seem to have some merits.

I wonder if such a business could survive in a socialist economy, where a monopolistic government is supremely jealous of its role. Note how Obama Motors has corrupted the regulatory process in an attempt to drive out foreign competitors, and is even now corrupting the process that regulates banks and securities. Such a government would either need to coopt a Mondragon or squash it like a bug.

But whether or not that is the case, I think we can all agree that the trail of destruction (loss of the extended family, community and the value of place) is not uniquely associated with capitalism.

on the positive side – GM has paid back it’s loans plus interest to the US Govt – so I believe that means we the people are no longer in the car business.

John Gorentz – interesting notion re: whether or not something like Mondragon can survive in a socialist economy. There are a number of Mondragon inspired ventures starting out now in the US – so we may get a chance to see how they prosper here.

Steve capitalism has never existed without massive amounts of state intervention to create and sustain it(as Kevin Carson among others shows well.) so to speak speak of capitalism as creatively destroying, in any natural or obviously righteous manner, is silly.

John Gorentz, you mistake is much the same as Steve’s. “Free market” capitalism(even if a simple definition of a “free market”, independent of the society and culture at large, were possible.) is a basically an entity that has never existed. Capitalism has always been had massive amounts of state intervention to support it and the amounts have only increased. The sort of capital outlay seen in socialism and corporate-capitalism therefore have precious little to do with economies with relatively little state fuelled and centralised distortions(as close a definition of “free market” as can really be briefly made.)

Wessexman, historically, we have had government to enforce contracts which seems to assist in the creation of prosperity, etc. From my observation, generally speaking, to the extent we’ve had more government involvement we have had inflation and (or) lower quality. Look at public (& more & more private) education and medicine. Contrast these with the scenario under which computers became ubiquitous with better quality at lower prices.

Granted, it is difficult to find examples of purely free markets. However, it seems to me that quality and government involvement are inversely related.

I have a sense that, since the size of our governments appear to have reached unsustainable levels, we may live to see a real life experiment come to fruition. Some of us are starting to wonder if we will have a Gorbachev in our future?

@Ceceilia, GM merely took some unused TARP funds to “repay” the loan. IOW, they repaid it not from real earnings, but from political “earnings.” And the loan was just a small part of the bailout; the gov’t still owns 62% of GM.

Steve, the historical reality is the opposite of the myth. The less gov’t involvement in the markets, the more unstable they have been. In the period between 1853 and 1942, the economy was in recession 41% of the time. Since then (since, that is, full scale gov’t management of the economy) we have been in recession 16% of the time. I am not here arguing for gov’t management, I am merely pointing to an historical reality.

John M, Steve said quality, while you responded with some statistics about stability. Not the same thing.

For myself, I’d be careful making generalizations one way or another about government “involvement.” There are so many different kinds of involvement — some of it good and proper, others corrupt and harmful.

Computers are a poor example of the putative free market. The computer industry has been nursed, directly and indirectly, by the Pentagon (or its precursors) since World War Two. This extends also to the internet, first developed for “defense” purposes and to video games. Didn’t Ross Perot’s billions come from DOD computer contracts?

Thanks, Amy. You’re correct as per John G’s excellent point. I was thinking in terms of regulation, barriers to entry, etc. On a relative basis, the hardware and software businesses have generally been a free market free-for-all. While this has made the business tumultuous, it has created much better products continuing to lower prices. Some argue that things would even be better if the gov didn’t grant patent protection?

Well Steve John has responded to some of your claims but my point is that though we can speak of relatively less gov’t intervention one cannot speak of anything like little gov’t intervention after at least 1800 so(in Europe long before that.). And this intervention has accumulated by necessity, to support the imbalances caused by previous intervention.

So there is little point in talking about historical capitalism as having anything to do with free markets(even if the concept of free markets were something simple and easily definable.). You try and lessen gov’t intervention without getting to the root of the economic imbalances that past state intervention has created and the system will collapse. Even those hardware and software markets you talk of are both within a mesh of state-capitalism and cannot be isolated from it and also unlikely to be without much of a state role anyway. We all know the high levels of state influence there has been in the computer sector over the decades.

Wessexman brings up a very interesting point, one that properly deserves it own essay. However, I will attempt a brief reply within the confines of the combox. And briefly, the response is that historically, the closer we were to the “free market” ideal, the less stable both the markets and the society. The victory of the liberals in 1832, who brought the ideals of radical laissez-faire, destabilized both the economy and the nation. The liberals brought three great institutions: the poor house, the triumph of the bank of England, and the “dark satanic mills.” But they also brought a degree of instability–economic and social–that would simply be intolerable today.

The truth is, the best period in American economic history, in terms of economic stability, has been since the War. This is the period of my entire life, the period of a Keynesian economy. It was a period when a person like myself, with few marketable skills, could live a very good life indeed. Now I think that age is coming to an end, and my children and grandchildren will not have the opportunities that I had. But we who have benefited so much from this system should at least mourn its passing, however inevitable we regard it; gratitude is always a proper response to such an expensive gift. And in Keynes’s defense, we might note that the system we have is only half-baked Keynesianism: we were happy with the “cut taxes and raise debt” half of the prescription for bad times, but reluctant to implement the other half, the “raise taxes and repay the debt” in good times. Now we have an economy permanently addicted to the economic steroids of permanent stimulus. Like many an aging athlete so addicted, we will lose all of our powers.

I agree that each successive period of the half-baked Keynesianism requires greater effort, and the system is now ready to fall of its own weight. But an effort to reestablish a laissez-faire will only lead to where such efforts have always led. Unless, of course, you can present us with some actual historical successes of this system. I cannot myself think of any, but I may have overlooked something.

Amy, the fact that govt was involved in the birth of some aspects of the computer industry does not mean computers are not an excellent example of what free markets can do. Mothers give birth to kids — and then those kids grow up, move away from home, and do great things. The fact that Mom was involved at the birth and beyond does not mean the kid would have accomplished more by staying home until age 40 so he could continue to nurse at her breast. Good mothers (and there are many of them) raise their kids so they can be independent enough to support themselves and make their own choices.

“I agree that each successive period of the half-baked Keynesianism requires greater effort, and the system is now ready to fall of its own weight. But an effort to reestablish a laissez-faire will only lead to where such efforts have always led. Unless, of course, you can present us with some actual historical successes of this system. I cannot myself think of any, but I may have overlooked something.”

I agree. What is important to note though is that those periods which looked like laissez faire weren’t, the imbalances and state intervention were already present and they lacked the stabilising measures of Keyenesianism. That doesn’t mean I support “free market” capitalism of course, that system has never existed and I don’t think there is any simple definition of what a “free market” is. However a relatively state-free economy is required but this can only be beneficially achieved when balance is restored the economy and this means the system must be distributist. It is distributism not neoliberalism which will achieve the rolling back of the state because it is distributism which would not collapse without a massive role for the state.

Of course at this rate the system will probably collapse of it own accord, it must someday because the level of stabilising intervention needed is always increasing but it can’t do this forever, before distributists have the chance to prevent it so in some ways it is academic. But lengthy odds are no reason not to continue fighting the good fight.